India Inc salary hike projected at 9.1% in 2026, skill-based pay leads: EY

An EY India report said that GCCs are expected to record the highest salary growth at 10.4%, driven by sustained global demand and investments in specialised digital skills

Salary increments in India are expected to rise by 9.1 per cent in 2026, as companies increasingly shift towards skill-based pay frameworks and sharper performance-linked rewards, according to an EY India report published on Monday. The projected growth reflects a slight decline from 9.3 per cent growth in 2025. 

The report, titled 'Future of Pay', stated that the global capability centres (GCCs) are expected to record the highest salary growth at 10.4 per cent, driven by sustained global demand and investments in specialised digital skills. Financial services are projected to see increments of around 10 per cent, followed by e-commerce at 9.9 per cent and lifesciences and pharmaceuticals at 9.7 per cent, the report said.

 

Attrition rate falls

The report also noted that overall attrition declined to 16.4 per cent in 2025 from 17.5 per cent a year earlier. The decline, the report said, is consistent with a cooling labour market, where employee risk appetite has reduced.

Who's leaving?

According to the report, over 80 per cent of exits were voluntary, indicating that attrition is "largely employee-driven and opportunity-led" rather than driven by "restructuring or forced separations". 

Financial services reported the highest attrition at 24 per cent, particularly in sales, relationship management and digital roles. Professional services stood at 21.3 per cent, while Hi-Tech and IT recorded 20.5 per cent. GCCs reported lower attrition at 14.1 per cent.  ALSO READ: New labour codes unlikely to hit salary hikes; IT may see softer gains 

"The future of pay in India is no longer defined by the size of the annual increment alone. It is increasingly about precision – deciding which skills to invest in, which outcomes to reward, and how to balance competitiveness with sustainability. Rewards strategies are becoming more deliberate, with sharper differentiation and better use of data to guide decisions," said Abhishek Sen, partner and leader at EY India. 

He further added that employees are looking beyond the size of increments and increasingly seeking clarity, fairness, and consistency in how pay decisions are made.

Shift to skills and variable pay

The report highlights a steady move from role-based to skills-based compensation models. Nearly 45–50 per cent of surveyed organisations are transitioning to skill-based pay frameworks. Emerging technology roles, including artificial intelligence (AI), generative AI, machine learning and engineering, are commanding skill premiums of up to 40 per cent. 

Average variable pay as a share of fixed pay also rose to 16.1 per cent in 2025, up from 14.8 per cent in 2024. The gap between high and average performers widened, with top performers earning 120–150 per cent of target payouts compared with 60–80 per cent for average performers, the report noted. 

Another trend gaining traction among Indian companies is the adoption of quarterly variable pay cycles. Nearly 28 per cent of organisations have introduced quarterly payouts, particularly in sales-driven roles, the report said. 

Long-term incentives and executive pay

Companies are also reshaping long-term incentive plans (LTIPs) to strengthen retention and align pay with long-term value creation. Nearly 75 per cent of NSE 200 companies offer LTIs, making them a standard component of chief executive officer (CEO) compensation. "At the same time, GCCs and technology-led organisations are broadening LTI eligibility beyond leadership teams to include individual contributors with critical and scarce skills," the report said.

CEO salary in Indian companies

According to the report, median CEO compensation in Nifty 200 companies reached ₹7–9 crore in 2025, marking a 12–15 per cent year-on-year (Y-o-Y) increase. Out of this, fixed pay accounts for 25–30 per cent of total CEO compensation, short-term incentives contribute another 25–30 per cent, and long-term incentives make up 45–50 per cent, the report said.

ALSO READ: New labour codes unlikely to hit salary hikes; IT may see softer gains